This Tech ETF Has More than Doubled in 2026. Is It a Good Buy for the Back Half of the Year?

Any time an ETF can double in value in a handful of years, it's an impressive feat. Based on the Rule of 72, it would take an investment 7.2 years to double in value if it averaged 10% annual returns.

Any time an exchange-traded fund (ETF) can double in value in half a year, it's on a generational run. That's been the case so far this year with the iShares Semiconductor ETF (NASDAQ: SOXX). Through market close on June 22, SOXX is up 108%, 12 times higher than the S&P 500's returns in that time.

Considering SOXX's huge run-up this year, is it still a buy, or have investors missed the boat? Let's take a look.

Image source: Getty Images.

Why have chip stocks received so much attention?

Semiconductors (chips) are the invisible heroes of the tech world. You might not see them, but any time you're using an electronic device -- whether it's a smartphone, laptop, tablet, TV, or car infotainment system -- you're indirectly interacting with chips.

Chips have always been important in the tech world, but semiconductor stocks have recently become some of the most sought-after stocks because they are crucial to the AI ecosystem. Without them, there wouldn't be an AI ecosystem.

Semiconductor businesses have seen unprecedented demand, and, in true stock market fashion, where there's a lot of money being made (or to be made), investor interest increases.

What you're getting when you invest in SOXX

SOXX contains 30 of the world's most valuable and important semiconductor companies, but most of its influence comes from its top holdings, which account for just over 59% of the ETF:

• Micron: 8.39%
• Advanced Micro Devices (AMD): 7.48%
  
• Nvidia: 7.17%
  
• Broadcom: 6.61%
  
• Intel: 6.07%
  
• Marvell Technology: 5.44%
  
• Applied Materials: 4.92%
  
• KLA: 4.85%
  
• Lam Research: 4.39%
  
• Taiwan Semiconductor Manufacturing (TSMC): 4.12%

Investing in SOXX lets you instantly capture the entire semiconductor supply chain with a single investment. It has pure-play chip designers such as Nvidia, AMD, Broadcom, Qualcomm, and Marvell; hybrid manufacturers such as Micron and Intel; equipment makers such as Applied Materials, KLA, and Lam Research; and the go-to chip foundry, TSMC.

It's a one-stop shop for a niche, yet critical, piece of the semiconductor value chain.

How SOXX has historically performed against the market

Admittedly, SOXX's annual averages are a bit skewed by its huge gains over the past few years (up 300% in three years), but it has solidified its status as a routine candidate to outperform the market. Here are its average annual returns over different time periods:

Data source: YCharts. Table by author. Returns as of June 22.

Nothing is guaranteed in the market, but SOXX is led by heavyweight tech companies that seem to have significant growth potential ahead. I wouldn't expect it year in and year out, but I'd expect it over the next couple of years, while the companies are positioned perfectly in the current AI boom.

One aspect of SOXX that you shouldn't overlook

One downside of SOXX is its expense ratio of 0.34%. Although it seems small on paper, it's more than 10 times as expensive as popular S&P 500 ETFs, and considerably higher than most index-mirroring ETFs.

Paying 0.34% is undoubtedly a small price to pay when an ETF is up over 100% in six months, but SOXX's current growth pace isn't realistic for the long haul. Eventually, it will cool off, and that fee will have a much larger effect. That alone shouldn't deter you from investing in SOXX, but it's something worth noting, so don't overlook it.

If you're looking to invest in SOXX expecting the same returns it's produced this year, you're in it for the wrong reasons, and you'll likely be disappointed. However, if you recognize the importance of semiconductors to the tech world and want a piece of the growing industry, SOXX is one of the best ways to do so. It provides exposure without the added risk of investing in individual stocks.

Stefon Walters has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Applied Materials, Broadcom, Intel, KLA, Lam Research, Marvell Technology, Micron Technology, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, and iShares Trust - iShares Semiconductor ETF. The Motley Fool has a disclosure policy.